Jerusalem holds deep religious significance for Jews, Muslims and Christians. It includes the holiest ground in Judaism, the third-holiest shrine in Islam and major Christian sites linked to the life of Jesus.
"It's a pleasure for me on Christmas Eve to be here, standing, in Jerusalem, right behind me, the holy city," Netanyahu said in a video message.
"I'm very proud to be the Prime Minister of Israel, a country that says 'Merry Christmas' first to its Christian citizens and to our Christian friends around the world. I'm proud that Israel is the country in which Christians not only survive, but they thrive," he said.
This follows the unusual offer in which the Israeli Prime Minister also offers to personally take Christian pilgrims on a walking tour of Israel's Christian holy sites next year.
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"So now I have a proposition for all our Christian friends. I'm going to take next year on Christmas, for those of you who come to Israel, a guided tour. In fact, I'll be your guide on this guided tour," he says.
"And think of all the places you can walk. You can go to the Jesus boat on the Sea of Galilee, you can get to the Church of the Holy Sepulchre here right behind me, any place that youll want to visit in the footsteps of Jesus and the origins of our Judaeo-Christian heritage," Netanyahu elaborates.
Christians gathered in Bethlehem yesterday for an annual parade and other events, ending in midnight mass at the Church of the Nativity.
Extra police officers were deployed at crossings in Jerusalem and Bethlehem for the holiday.
Jerusalem has been recently in news when US President Donald Trump announced that he will recognise Jerusalem as Israel's capital and start the process of moving the US embassy from Tel Aviv to the holy city.